How Adidas Is Keeping Up the Pressure on Nike and Under Armour

The new boss of Adidas increased sales and profit targets on Wednesday, sending shares in the German sportswear firm to a record high as he pledged to keep investing heavily in the key U.S. market and do more to boost ecommerce sales.

The more ambitious targets will maintain the pressure on U.S. rivals Nike and Under Armour, which have both been losing sales to the German brand in their home market, where its retro Superstar was the top selling shoe of 2016.

Kasper Rorsted, the Danish former boss of consumer goods firm Henkel who took over in October, said he was adding new goals to an existing 2015-2020 strategic plan, putting more focus on company culture, ecommerce and efficiency.

Rorsted replaced long-serving boss Herbert Hainer with a mandate to improve profitability after activist shareholders took stakes in Adidas in 2015 as the German firm fell further behind Nike in the United States.

Even before Rorsted took over, Adidas (addyy) had made significant strides, lifting marketing spending and shaking up its U.S. business, helping its shares rise two-thirds in the last 12 months even though its profitability still lags that of Nike (nke).

Adidas shares, which are now trading at a big premium to Nike, jumped 7.6% by 8:28 a.m. GMT to hit a new record high, headed for their best day since November 2015.

“The mid-term guidance clearly implies that new management anticipate a multi-year growth path, taking share from most peers,” said Equinet analyst Mark Josefson, who raised his recommendation on the stock to “buy” from “neutral.”

On Wednesday, Rorsted said Adidas was still under-represented in the United States, the world’s biggest sporting goods market, and said he would invest more in personnel, infrastructure, marketing and in-store fittings and campaigns.

Adidas more than doubled its share of the U.S. athletic footwear market to 10% in January, but remained far behind Nike on 45%, according to market data firm NPD.

German rival Puma has also been enjoying a revival in the U.S. market, helped by a shift towards retro styles and away from basketball shoes which has hurt Under Armour (uaa) and dampened Nike’s success.

Ecommerce Target Doubled

Rorsted said he wanted to focus even more strongly on the Adidas and Reebok brands in future, announcing plans to sell the ice hockey brand in addition to its golf business, which has been on the block since last May but has yet to find a buyer.

Rorsted also plans to expand the use of technologies such as 3D printing, and increase ecommerce sales to 4 billion euros ($4.2 billion) by 2020, up from a previous target of 2 billion, and 1 billion achieved in 2016.

Nike has set a target to reach $7 billion in ecommerce sales by 2020, out of expected total revenue of $50 billion.

On Tuesday, Adidas said it has appointed Harm Ohlmeyer, head of the group’s global ecommerce business, as new finance chief from May 12, replacing Robin Stalker.

Rorsted announced plans to harmonize and simplify business processes, including reducing the number of articles offered and harmonizing marketing activities, a similar strategy to that he pursued at Henkel, which helped boost profitability there.

Rorsted also said he would make a push to promote more women at the firm based in conservative southern Germany, while introducing a plan to link pay for top executives to the development of the Adidas share price.

Adidas lifted targets for currency-neutral revenues to rise between 10% and 12% on average between 2015 and 2020, while net income should grow between 20% and 22%.

For 2017, Adidas forecast currency-neutral sales growth of between 11% and 13% and net income to rise by as much as a fifth to a level up to 1.22 billion euros, ahead of the 1.13 billion euros expected by analysts.

Adidas reported a fourth-quarter net loss of 10 million euros on sales up 12.5% to 4.69 billion euros, in line with most analyst forecasts after it took a one-off charge to help restructure struggling fitness brand Reebok.

SPONSORED FINANCIAL CONTENT

You May Like

Read More

Sign Up for Our Newsletters

Sign up now to receive FORTUNE's best content, special offers, and much more.